Alliance Advisors Newsletter Sept. 2012 (2012 Proxy Season Review-Shareholder Resolutions)

1 2012 Proxy Season Review: Shareholder Resolutions | THE ADVISOR, September 2012

2012 PROXY SEASON REVIEW: SHAREHOLDER RESOLUTIONS By Shirley Westcott September 2012

As a follow-on to our mid-year review of say on pay,

this article examines some of the key shareholder

proposals seen this proxy season.

Overview

The 2012 proxy season was a highly active one for

shareholder proponents. Through August, over 1,000

shareholder proposals had been filed and nearly 500

were brought to a vote, well ahead of last year’s pace.

Although two signature campaigns of the season—

proxy access and audit firm rotation—were largely

suppressed through company exclusions, shareholder

activists more than made up for them with other

proposal submissions. For a second year in a row,

corporate campaign finance surpassed all other

categories of resolutions in sheer number, followed by

proposals calling for board declassification and the

appointment of an independent chairman.

Compensation-related proposals were up in count as

well by nearly 50%.

The number of shareholder resolutions receiving

majority support, based on votes cast “for” and

“against,” also increased over last year (117 in 2012 vs.

100 in 2011), though they largely occurred among three

classes of resolutions: board declassification, the

adoption of majority voting in director elections, and

the repeal of supermajority vote requirements (see

Table 1). One notable change was a drop in the number

of written consent proposals receiving majority support:

only six this year (29% of the total on ballots),

compared to 12 in 2011 (36% of the total).

Vote results only tell half the story of where

shareholder activists made inroads in advancing their

agendas. Over 300 shareholder resolutions were

withdrawn or omitted because the companies chose to

address the underlying issue in a competing

management proposal. Among governance proposals,

issuers primarily capitulated on board declassification,

adoption of majority voting, and expanding special

meeting rights. Among environmental and social

proposals, companies and proponents most often

reached agreements on sustainability reporting,

disclosure of political and lobbying expenditures, and

adding sexual orientation and gender identity to equal

employment policies.

Below is a more detailed discussion of this year’s most

significant shareholder initiatives.

Proxy Access

Private ordering of proxy access made its debut this

season after a federal court overturned the SEC’s Rule

14a-11 in 2011. While there were some ambitious

filings by retail activists, institutional proponents took a

more measured approach in their targeting and

ultimately achieved the highest success rate. Through

mid-September, 24 shareholder resolutions to adopt

proxy access had been submitted, though only 12 made

it to ballots (see Tables 2 and 3).

Access proposals sponsored by union and public

pension funds made the biggest impact by virtue of

mirroring the SEC’s vacated 3%/3-year rule and by

being directed at companies that already faced negative

investor sentiment over governance, pay, and

performance. Two won majority support (Chesapeake

Energy and Nabors Industries), and a third at Hewlett-

Packard was withdrawn after the company agreed to

put a management-sponsored proxy access proposal on

the ballot in 2013.

Binding proxy access proposals also made a respectable

showing, but fell well short of the necessary approval to

amend the targeted companies’ bylaws. Norges Bank

Investment Management (NBIM) sponsored four ballot

resolutions that would allow a 1%/1-year holder to

nominate up to 25% of the board, while Furlong Fund

founder Daniel Rudewicz proposed a bylaw at KSW

THE ADVISOR


that would allow a 2%/1-year holder to nominate one

director. KSW was the only company that adopted its

own proxy access bylaw in response to a shareholder

resolution, albeit at a higher (5%) ownership threshold.

Although KSW was unable to exclude the Furlong

Fund proposal as substantially implemented,

shareholders and proxy advisors ultimately preferred

the company’s higher ownership requirement given its

small market capitalization.

Retail investors affiliated with the U.S. Proxy Exchange

(USPX), including John Chevedden, James McRitchie,

and Kenneth Steiner, were the most prolific proxy

access filers, though many of their proposals were

successfully omitted by companies that challenged

them. Styled to put board nominations within reach of

small institutions and retail holders, the initial USPX

resolutions sought proxy access for 1%/2-year holders

or, alternatively, a group of 100 shareholders who each

met Rule 14a-8(b) eligibility requirements (i.e., owned

$2,000 of stock for one year). Each nominating group

could nominate one director or, if greater, 12% of the

board. After a flurry of exclusions, the proponents

revised their second eligibility requirement to permit

proxy access for a group of 50 holders who each owned

$2,000 in stock at some point in the preceding 60 days.

Neither version of the USPX proposal made serious

headway with investors, other than at financially-

troubled Princeton National Bancorp where support

reached over 30% (for the first version). However, this

is unlikely to deter the USPX proponents from

continuing their filings, particularly since their newer

proposal withstood no-action challenges by Forest

Laboratories and Medtronic.

Proxy advisor opinions had limited influence on proxy

access votes, particularly on the NBIM and USPX

proposals where their recommendations often diverged

(see Table 2). Although both Institutional Shareholder

Services (ISS) and Glass Lewis support proxy access in

principle, their analytical approaches differed. ISS

primarily focused on the parameters of the proposed

proxy access regime, particularly the ownership

threshold relative to the company’s market

capitalization. As a result, ISS supported the U.S.

pension funds’ 3%/3-year proposals and NBIM’s 1%/1-

year proposals as reasonable ownership levels for

invoking proxy access at large-cap companies. On the

same basis, ISS rejected the Furlong Fund’s 2%/1-year

proposal at KSW because it felt the company’s 5%/1-

year eligibility requirement represented a more

meaningful stake in a small-cap firm. ISS also rejected

all of the USPX proposals because they would allow

holders of only $100,000-$200,000 of stock to

nominate board candidates.

Glass Lewis, for its part, attached more importance to

governance issues at the targeted firms, which could

justify a need for proxy access, rather than the structure

of the actual proposal. While Nabors Industries and

Chesapeake Energy were easy calls, at other companies

it was difficult to discern where Glass Lewis was

setting the bar in terms of deficient governance. For

example, Glass Lewis supported proxy access at Wells

Fargo, even though it acknowledged that the company

had strong governance and financial performance. On

the other hand, Glass Lewis rejected proxy access at

Medtronic, which arguably has weaker governance,

compensation practices, and performance.

Because the SEC has no immediate plans to revisit

proxy access, shareholder proponents can be expected

to continue their campaigns in 2013 with some fine

tuning of their proposals and targets. While it is

evident from this year’s votes that mainstream investors

are being selective in their support of proxy access, the

proposals are still a valuable tool for leveraging other

governance reforms from companies. Among this

year’s targets, six companies agreed to declassify their

boards, three companies adopted a majority vote or

“plurality plus” standard in director elections, and two

non-independent board chairmen have stepped down.1

1 Charles Schwab, CME Group, Nabors Industries, Pioneer Natural

Resources, and Western Union proposed board declassification at

their 2012 annual meetings, while Chesapeake Energy will seek

relief from the Oklahoma statute mandating classified boards by

2013. All of the declassification proposals passed except at Charles

Schwab. However, Nabors Industries offset the loss of its classified

board by adopting a one-year poison pill with a 10% trigger after its

proposal to adopt a supermajority vote requirement failed at the

annual meeting. Chesapeake Energy and Pioneer Natural Resources

additionally adopted majority voting, while Nabors Industries

adopted a director resignation policy. Nabors Chairman Eugene

Isenberg retired at the annual meeting and waived his controversial

severance package. Chesapeake CEO Aubrey McClendon also


Board Declassification and Reincorporation

Shareholder campaigns to declassify boards were

propelled this year by the Harvard Law School

Shareholder Rights Project (SRP), a clinical program

initiated by Lucian Bebchuk in 2011 whereby faculty

and law students assist public pension funds and

charitable organizations to improve corporate

governance at publicly traded companies. This year,

program participation expanded to include four public

pension funds (North Carolina State Treasurer, Illinois

State Board of Investment, Los Angeles County

Employees Retirement Association, and Ohio Public

Employees Retirement System) in addition to the

Nathan Cummings Foundation.

The SRP’s efforts have paid off both behind the scenes

and at the ballot box. Participants reportedly reached

agreements with 44 of the 87 S&P 500 companies

where they submitted declassification proposals. Of

their 39 resolutions on ballots (accounting for 75% of

the total), only two failed to garner majority support:

PACCAR, where the proposal received 49.9% support,

and Kellogg, which has significant ownership by the

W.K. Kellogg Foundation. More proposals are in the

pipeline for the remainder of 2012 and 2013. In late

August, the SRP announced that the Massachusetts

Pension Reserves Investment Management Board has

joined its ranks and has already submitted

declassification proposals at 20 companies, four of

which have agreed to comply.

Overall, shareholder-sponsored declassification

proposals showed a dramatic increase this year in both

number (27% more than 2011) and in average support

(80.1% versus 71.5% in 2011). Seventeen proposals

received over 90% support, though in many cases due

to unique circumstances. Eight proposals went

unopposed by the targeted companies, three had

stepped down as chairman. The company is reconstituting the board

with four independent directors proposed by its two major

shareholders and has discontinued a program that allowed

McClendon to invest in new company wells.

received past majority support, and two were associated

with proxy fights.2

Aside from declassification resolutions, individual

investors revisited the prospect of reincorporation in

Delaware at companies whose state laws now require

classified boards by default. A proposal by Gerald

Armstrong at Chesapeake Energy won majority

support, though it was effectively preempted four days

before the annual meeting when the company

announced it would seek relief from Oklahoma’s statute

in advance of its 2013 annual meeting. John

Chevedden also pursued reincorporation at Indiana-

based ITT. However, unlike past campaigns by the

American Federation of State, County and Municipal

Employees (AFSCME), Chevedden’s motivation was

not board declassification (which ITT already has) but

relief from the state’s unanimous written consent

provision. This argument failed to sway shareholders

and proxy advisors and the proposal fell flat with only

3.3% support.

Broker Voting and Supermajority Voting

Corporate efforts to declassify their boards or make

other governance reforms were often frustrated this

year due to a combination of supermajority approval

requirements and changes to broker voting rules. In

January, the New York Stock Exchange (NYSE)

revised Rule 452 to prohibit brokers from voting

without client instructions on certain governance

resolutions, thereby eliminating a bloc of votes

typically favorable to management.

2 Six boards made no recommendation on shareholder

declassification proposals this year: ANN, Edwards Lifesciences,

Lorillard, People’s United Financial, QEP Resources, and Quest

Diagnostics. Two others supported the shareholder proposal:

Baxter International, where a management declassification proposal

failed last year, and Best Buy, whose board initially made no

recommendation on the shareholder resolution but switched to

supporting it. Declassification resolutions also received over 90%

support at CF Industries Holdings, Hospitality Properties Trust, and

MEMC Electronic Materials--where the shareholder proposals had

received majority support in 2011--as well as at Cognizant

Technology Solutions, Healthways, Lexmark International, and Red

Hat. Dissidents at Ambassadors Group and ModusLink Global

Solutions sponsored declassification resolutions in conjunction with

their proxy contests, and these proposals received over 90% support.


Through August, 8 out of 68 management proposals to

declassify boards failed.3 In all cases, the charter

amendments carried lofty approval thresholds—75% to

80% of outstanding shares—though one company

(Cigna) also made no recommendation on its own

proposal.4 Shareholder proponents, however, have

been undeterred in bringing back the issue. A

shareholder proposal at Eli Lilly was withdrawn this

season after the company agreed to try (and ultimately

failed) to destagger its board for a sixth consecutive

year. Shareholder declassification resolutions also

reappeared on ballots at Baxter International, Hess, and

Limited Brands, despite unsuccessful management

proposals in recent years.

Supermajority requirements also thwarted company

proposals to enhance other shareholder rights, including

adopting majority voting in director elections (Boston

Scientific, Chesapeake Energy and Medtronic) and

reducing shareholder ownership thresholds for calling

special meetings (Hercules Offshore) and acting by

written consent (AT&T).5 But what most often alluded

companies was repeal of the supermajority voting

provisions themselves. To date this year, over one third

of the management proposals to eliminate or reduce

supermajority vote requirements were defeated (12 out

of 32), compared to a mere 9% last year (6 out of 70).

Shareholder requests to rescind supermajority

provisions in favor of a simple majority vote were light

this year (18 proposals through August), as they were in

2011, reflecting the extent of corporate compliance

with past initiatives.6 However, some companies are

3 Management declassification proposals failed at Alcoa, Charles

Schwab, Cigna, Eli Lilly, Franklin Street Properties, Planar

Systems, PPG Industries, and St. Jude Medical.

4 Although Boston Private Financial Holdings also made no

recommendation on its own declassification proposal, it still passed

by the requisite 67% of outstanding shares.

5 Although Chesapeake Energy’s charter amendment to adopt

majority voting failed at the 2012 annual meeting, the board decided

to adopt the provision in its bylaws and apply it to its 2012 director

vote.

6 Two-thirds of the companies that received majority support last

year on shareholder resolutions to drop supermajority voting

complied by 2012. In comparison, 75% of the companies that

resorting to partial steps to appease proponents. Duke

Energy and Piedmont Natural Gas omitted shareholder

resolutions this year by offering competing

management proposals to simply pare down their

supermajority requirements from 80% to 67% or 75%.

Majority Voting

This year’s proposals to implement a majority vote

standard in director elections have tracked in line with

2011. Through August, 37 shareholder proposals were

on ballots, compared to 39 during 2011, and average

support stayed consistent at 62%.7

Despite widespread acceptance of majority voting,

shareholder resolutions have not been a slam-dunk in

winning investor approval. Many of the targeted

companies had a “plurality plus” standard (plurality

voting coupled with a director resignation policy),

which some investors regard as comparable to a

majority vote standard. So far this year, 23 shareholder

proposals have secured majority support, or 62% of the

total, which is roughly the same proportion as last year.

Although six racked up sizable tallies (over 90%

support), in most cases it was because the boards chose

not to oppose the shareholder resolution.8

One notable change this year has been a shift in

proponents and targets. The California State Teachers’

Retirement System (CalSTRS) surpassed the United

Brotherhood of Carpenters Pension Fund as the most

active proponent of majority voting, reportedly filing

61 proposals and accounting for a third of those on

ballots. And unlike the Carpenters, who have focused

on S&P 500 companies, most of the CalSTRS targets

were small and mid-cap firms, signaling that activists

received majority support last year on shareholder resolutions to

declassify the board complied by 2012.

7 These include two shareholder proposals from different

proponents at Franklin Street Properties.

8 International Bancshares and PACCAR supported the shareholder

proposal, and Middleby, National Health Investors, and THQ made

no recommendation on it. Stifel Financial’s board reversed its

recommendation on the shareholder proposal from “against” to

“for.” However, because this occurred less than two weeks before

the annual meeting after many shareholders had voted, the proposal

only won 77.7% support.


are migrating this initiative downstream.9 This has

significant consequences, considering that most

companies whose directors receive high levels of

dissent are in this universe. Through August of this

year, 72 directors at 49 companies received majority

opposition votes, but only five of these companies (10

directors) were in the S&P 500 Index. Of the 49 firms,

only three had a majority vote standard in place

(Chesapeake Energy, Hospitality Properties Trust, and

NYSE Euronext) and one had a plurality plus standard

(China Biologic).10

Nevertheless, even companies with

pure plurality voting are being mindful of majority

opposition votes, with directors at three so far

(GameTech International, Jacksonville Bancorp and

United Stationers) bowing off their boards.

Cumulative Voting

The expansion of majority voting has had another side

effect, namely a dampening of shareholder interest in

cumulative voting. The two are regarded as

fundamentally incompatible because cumulative voting

could result in a director being elected without the

support of a majority of shareholders. As in the past,

several companies were successful this year in

repealing cumulative voting provisions as a trade-off

for adopting majority voting. More striking is that

shareholder campaigns promoting cumulative voting—

largely the purview of Evelyn Davis—received the

lowest average support in five years (23.6%). Virtually

all of her targets had a majority vote standard.

Separately, union pension funds reintroduced proposals

that would carve out cumulative voting for contested

elections only, which could facilitate the election of

dissident nominees either in a traditional board contest

9 CalSTRS reported in August that it engaged 95 companies on

majority voting and reached agreements with 82 of them to adopt

the standard.

10 Chesapeake Energy’s board accepted the resignation of

Richardson Davidson and is reviewing that of V. Burns Harris. The

NYSE Euronext board accepted the resignation of Ricardo Salgado,

who had had poor attendance. The Hospitality Properties Trust

board rejected Bruce Gans’ resignation because shareholder

opposition was prompted by the company failing to implement a

majority-supported shareholder proposal to declassify the board.

China Biologic accepted the resignations of two directors (Chong

Yang Li and Sandy Zhang) who received a majority of withhold

votes.

or under a proxy access regime. However, average

support for limited cumulative voting also dropped

significantly from 31.1% in 2011 to 23.9% in 2012.

Independent Chairman

Shareholder proposals calling for an independent board

chairman were on the rise this year with 52 voted on

through August, compared to 29 for all of 2011. But

despite the heightened activity and the backing of proxy

advisory firms, proponents of the resolutions—which

spanned union and state pension funds, social

investment funds, religious orders and individuals—

were unable to dial up support levels significantly,

which averaged 35.2% through August, compared to

34.1% in 2011.11

In keeping with past years, relatively

few independent chairman resolutions received

majority support in 2012, these levels being marginal at

best: KeyCorp (53.8%), Kindred Healthcare (52.3%),

McKesson (50.9%), and Sempra Energy (55.2%).12

Activists’ slow progress on this issue is likely

attributable to their targeting firms that have lead

independent directors, which many investors consider

to be a suitable counterbalance to a combined

chairman/CEO. Mainstream investors remain

unconvinced that a “one-size-fits-all” board leadership

structure is in shareholders’ best interests. Indeed, a

11 ISS supported 77% of the independent chairman proposals on

ballots through August 2012, compared to 71% of the proposals in

2011. ISS’s recommendations are based on whether or not the

company has an independent lead director with specific duties, the

company’s one- and three-year total shareholder returns against

peers, and any governance concerns at the company. Glass Lewis

supported all of the independent chairman proposals this year except

at Whole Foods Market, which already has an independent

chairman. Unlike ISS, Glass Lewis has no carve-out in its policy

for lead directors. Separately, Glass Lewis will recommend against

the chairman of the governance committee if the company has a

non-independent board chairman and no independent lead or

presiding director. This year, Glass Lewis opposed 496 governance

committee chairmen on this basis.

12 In 2011, independent chairman proposals won majority support at

four companies: Aetna (51.4%), Moody’s (56.6%), Vornado Realty

(50.7%), and Cedar Fair (81.1%), where the proposal was part of a

dissident’s proxy fight campaign. In response to the vote, Aetna

expanded the duties of its presiding director, Cedar Fair appointed

an independent chairman, and Moody’s will transition to an

independent chairman later in 2012.


recent study by Aiyesha Dey of the University of

Minnesota found that companies that split the chairman

and CEO roles under investor pressure performed

worse than companies that made the switch on their

own accord or that combined the two positions.13

Other independent chairman proposals that were in the

pipeline for the remainder of 2012 have been facing no-

action challenges. NBIM resubmitted bylaw

resolutions for a fourth consecutive year at Cardinal

Health, Clorox, and Harris, but all were omitted as

vague and indefinite. Although the proposals were

unchanged from previous years, they were faulted for

referring to, but not disclosing, the NYSE definition of

independent director that would apply to the bylaw—a

similar argument used to exclude some of this year’s

proxy access proposals.

CEO Succession Planning

CEO succession planning has gained greater attention

in recent years following numerous CEO departures

during the financial crisis and the highly publicized

illnesses of iconic leaders Warren Buffett and the late

Steve Jobs. Shareholder activism and regulatory

changes have also elevated the issue. In late 2009, the

SEC reversed its position towards CEO succession

planning from being a matter of ordinary business

operations to being a significant policy issue regarding

the governance of the corporation.

Union pension funds, particularly the Laborers

International Union of North America (LIUNA), have

pressed companies in recent years to adopt and disclose

details of their CEO succession planning strategies,

including developing criteria for the CEO position,

identifying and grooming internal candidates, annually

reviewing an emergency succession plan, and

beginning non-emergency succession planning at least

three years before an expected transition. While many

of the proposals were withdrawn—only four were voted

on this year—average support at 22.1% suggests that

investors have mixed views regarding the scope of

succession plan disclosures. The proxy advisors, for

13 The study is available at:

http://www.sciencedirect.com/science/article/pii/S09291199110010

03.

example, have been split in their recommendations:

ISS supports the resolutions, while Glass Lewis

opposes them as overly prescriptive.

Recent studies indicate that succession planning

warrants more boardroom attention. The National

Association of Corporate Directors’ (NACD) 2011

Public Company Governance Survey found that nearly

one-third of large public companies have no formal

succession plan, and of those that do, 25% do not

address the replacement of a CEO in an emergency.

Smaller companies may be more at risk. Research by

The Conference Board showed that 32% of firms with

$100 million or less in annual revenue only review the

CEO succession plan when there is a change in

circumstances, such as retirement, death, or illness.14

Special Meetings and Written Consent

Parallel campaigns by John Chevedden and his

affiliates to enhance shareholders’ special meeting and

written consent rights faced more corporate

preemptions this year, resulting in fewer proposals

making it to ballots.

Issuers successfully omitted 24 resolutions to allow

holders of 10% of the outstanding shares to call special

meetings, in most cases by offering competing

management proposals, albeit at higher ownership

thresholds to invoke the right (typically 25%).

Additional restrictions on ownership (holding periods

and the exclusion of derivatives) and on the frequency

and business of special meetings called by shareholders

are also becoming more commonplace in company

provisions. Although disliked by activist proponents

and ISS, shareholders have approved charter and bylaw

amendments containing such exclusions.

Variations in Chevedden’s proposals this year also

resulted in some omissions as well as some seemingly

inconsistent recommendations by ISS. Seven Delaware

companies excluded one version of the resolution as

vague and indefinite because it sought special meeting

14 The Conference Board’s 2011 and 2012 studies are available at

http://www.conference-board.org/retrievefile.cfm?filename=TCB-

DN-V4N12-12.pdf&type=subsite and

http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2032229.



http://www.conference-board.org/retrievefile.cfm?filename=TCB-DN-V4N12-12.pdf&type=subsite

http://www.conference-board.org/retrievefile.cfm?filename=TCB-DN-V4N12-12.pdf&type=subsite

http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2032229


rights for holders of 10% of the shares or the lowest

percentage of stock permitted by state law.15

Because

Delaware law doesn’t specify a minimum percentage of

outstanding shares that would be authorized to call

special meetings, the language in the proposal could be

subject to multiple interpretations (one share or 1% of

the shares). Six other Delaware companies chose not to

exclude the proposal, but in only one case (Knight

Capital) did ISS recommend against it on the grounds

that it could allow a holder of only one share to call a

special meeting.16

On the same basis, ISS rejected a

proposal by William Steiner at Waste Management

which sought special meeting rights for holders of the

lowest ownership percentage allowed by state law. The

proponents reworded some of their submissions,

thereby avoiding further exclusions, by requesting that

holders of 10% of the shares, or the lowest percentage

permitted by law above 10%, be allowed to call special

meetings.17

In all, only 15 of the Chevedden group’s special

meeting proposals went to a vote, down by half from

last year, and average support declined from 41.2% in

2011 to 39.6% in 2012. Five of their proposals

15 The companies that omitted the proposal as vague and indefinite

included Amazon.com, Danaher, Newell Rubbermaid, R.R.

Donnelley & Sons, United Continental Holdings, Western Union,

and Yahoo!.

16 In addition to Knight Capital, Celgene, Limited Brands,

NASDAQ OMX Group, Netflix, and Time Warner Cable received

this version of the proposal. However, unlike Knight Capital, which

permits holders of 25% of the shares to call special meetings, the

other firms do not grant shareholders any special meeting rights.

This may have driven ISS’s favorable recommendation, despite the

shortcomings ISS identified in the proposal. Merck, which is

incorporated in New Jersey, also received this version of the

proposal and ISS supported it. Merck allows holders of 25% of its

shares to call special meetings, and New Jersey law further permits

holders of 10% of the shares to call special meetings upon a

showing of good cause. The 10% threshold in the state law

provision likely prompted ISS’s endorsement of the shareholder

resolution. In its post season review, Glass Lewis reported that it

endorsed 77.8% of this year’s shareholder proposals on special

meetings, compared to 62.1% in 2011. It did not disclose its

recommendations at specific companies.

17 Companies receiving the revised version of the proposal included

Allergan, Chevron, Fifth & Pacific, Ford Motor, NYSE Euronext,

Pfizer, and Verizon Communications. At Verizon, the ownership

threshold in the proposal was 15%.

received majority support, but in all cases the

companies did not accord shareholders any special

meeting rights (Allergan, Celgene, NASDAQ OMX

Group, Netflix and NYSE Euronext).18

The lowest

support was registered at Knight Capital (14.5%) and

Waste Management (4.5%), the only two special

meeting proposals ISS opposed this year.

Shareholder proposals seeking the right to act by

written consent have also been down in number this

year, with only 20 on ballots through August, compared

to 33 during 2011. Although average support increased

substantially—from 38.1% in 2011 to 46.6% in 2012—

only six proposals received majority support, though

only marginally (51%-55%): Eastman Chemical,

Express Scripts, Gilead Sciences, International Paper,

JPMorgan Chase, and McKesson. ISS and Glass Lewis

supported all of this year’s written consent resolutions,

even though all of the targeted firms, other than

McKesson, provided shareholders with the alternative

ability to call special meetings.19

Corporate adoptions of written consent, either in

response to shareholder proposal submissions or past

majority votes, were on the rise this year. Most

companies are following Home Depot’s example from

last year and setting a share ownership threshold for

initiating a consent (ranging from 10% to 25%) along

with other procedural safeguards—limiting the business

covered in a consent, prohibiting selective solicitations,

and establishing a timeline between the request for a

18 Two additional special meeting proposals that were not sponsored

by Chevedden and his affiliates received majority support: a bylaw

resolution by hedge fund Hillson Partners LP at Orchids Paper

Products (84.9% support), and a bylaw resolution by private

investor Ronald Chez at Repligen (76% support). The Orchids

Paper Products board made no recommendation on the proposal,

which did not receive the necessary approval for amending the

bylaws. The bylaw proposal at Repligen passed.

19 ISS typically supports shareholder proposals to adopt written

consent unless the company gives holders of 10% of the shares an

unabridged right to call special meetings. In 2011, only two

recipients of written consent proposals met that condition, Kohl’s

and Sempra Energy. In 2012, Oshkosh also met that condition, but

it faced a proxy fight by Carl Icahn. ISS supported the written

consent resolution in conjunction with its support of Icahn’s

nominees.


record date and the delivery of consents.20

So far,

shareholders have not objected to such provisions, but

proponents may file future proxy proposals seeking to

remove any exclusionary language. This already

occurred this year at Home Depot and was endorsed by

ISS (though not Glass Lewis), but only received 25.9%

shareholder support.

Forum Selection Clauses

This year, companies faced headwinds from proxy

advisors and some investor groups over provisions

designating Delaware as the exclusive venue for

litigating intra-company disputes, such as shareholder

derivative suits. Although primarily put into place in

conjunction with IPOs, there was an upswing in

companies adopting forum selection provisions after a

2010 Delaware Chancery Court opinion (In Re Revlon

Shareholders Litigation) implicitly endorsed them as a

way to avoid costly multi-forum litigation. However,

some investors are now challenging exclusive forum

bylaws adopted without shareholder consent, both

through class action suits and shareholder resolutions.21

In 2012, Amalgamated Bank’s Longview Funds

submitted first-time proposals asking four companies to

repeal their exclusive forum bylaws. Two of the

resolutions were withdrawn after the companies

acquiesced (Roper Industries and Superior Energy

Services), while the two that went to a vote (Chevron

and United Rentals) received strong average support

(37.6%).

Companies also backed off from proposing exclusive

forum charter amendments. Two of the eight

management proposals that were scheduled this proxy

season were tabled (Calix and Fairchild

Semiconductor). Of the six voted on, two failed

(Cameron International and Suburban Propane

Partners) and one passed by a bare majority (Biogen

20 See Allstate, Altera, Amgen, CVS Caremark, and Northrop

Grumman.

21 Shareholder class action suits have been filed against 12

companies disputing the validity of unilaterally-adopted forum

selection bylaws. The complaints were dismissed at 10 companies

that repealed the bylaws and are pending at Chevron and FedEx.

Idec). Three others passed by a comfortable margin by

virtue of the companies having sizable insider

ownership or a significant shareholder (Beasley

Broadcast Group, Sally Beauty Holdings and Snap

Interactive).

Being a relatively new issue, investor sentiment

towards forum selection clauses is still evolving. The

proxy advisors, however, have adopted a decidedly

tougher stance towards them. This year, ISS amended

its policy to oppose exclusive forum provisions unless

the company demonstrated that it had been materially

harmed by shareholder litigation outside of its state of

incorporation and also possessed seemingly unrelated

governance practices (annually elected board, majority

voting in director elections, and no non-shareholder-

approved poison pill). However, in practice, ISS

opposed all company proposals to adopt forum

selection provisions and supported all shareholder

efforts to repeal them, even at companies that met ISS’s

alternative criteria (Chevron and United Rentals).

Glass Lewis made the same recommendations and

additionally opposed governance committee chairmen

at 15 companies which in the past year had adopted

exclusive forum provisions without shareholder

approval, including prior to their going public.

Compensation-related Proposals

Mandatory say on pay (SOP) has largely supplanted

shareholder resolutions over the past two years as the

preferred mechanism for expressing dissatisfaction with

executive compensation. Although there has still been

a smattering of proposals dealing with specific aspects

of pay, such as golden coffins, excise tax gross-ups, and

senior executive retirement plans (SERPs), only two

compensation proposals have received majority support

this year. One at Nabors Industries sought shareholder

approval of future executive benefits exceeding 2.99

times base salary and bonus. The high support for the

resolution at Nabors, along with two years of failed

say-on-pay (SOP) votes, was fueled by shareholder ire

over a $100 million severance package awarded to

former CEO Eugene Isenberg. The other proposal at

Patriot Scientific requested that directors and officers

purchase self-financed company stock valued at a

multiple of their total compensation. Patriot Scientific


has no formal stock ownership guidelines, and the CEO

and directors own very little company stock.

Union pension funds, which have historically been the

main proponents of compensation proposals, directed

their attention this year to tying executive compensation

to long-term performance. “Bonus bank” proposals

reappeared after a two-year hiatus calling for the

deferral of annual bonus payouts for three years after

the attainment of performance goals. However,

shareholder interest in this concept remained tepid, with

only 17.7% average support. Shareholder support also

receded on union-sponsored resolutions to restrict the

accelerated vesting of equity awards following a change

in control or an executive’s termination. The 12

proposals on ballots, a four-fold increase from last year,

received average support of 38.2%, compared to 41.5%

in 2011.

Labor funds and individual investors also ratcheted up

proposals dealing with executive stock retention, with

more than double the number on ballots (29) as in 2011

(11). Although the proposals varied widely in their

recommended retention ratios (25% to 75% of net after-

tax shares received from equity awards) and holding

periods (one year after terminating employment or

through retirement), all were endorsed by ISS and Glass

Lewis and received average support of 24.2%. Two

companies (AT&T and Exxon) were able to omit the

resolutions by adopting stock retention policies largely

mirroring those advocated by the proponents, along

with a policy prohibiting hedging transactions (a new

feature in this year’s shareholder proposals). However,

simply having stock ownership guidelines was not

deemed sufficient by the SEC as having substantially

implemented the proposal (American Tower).

Because of delays in SEC rulemaking on remaining

provisions of the Dodd-Frank Wall Street Reform and

Consumer Protection Act, proxy disclosures on pay for

performance, CEO pay ratios, employee and director

securities hedging, and clawback policies are unlikely

to take effect for the 2013 proxy season. Therefore,

issuers could see a resurgence of shareholder proposals

next year relating to these topics.

Political Spending

In advance of the fall presidential elections, which is

expected to generate a record-breaking $6 billion in

campaign spending, shareholder activists ramped up

proposals dealing with corporate political activities.

For a second year in a row, this topic outpaced all other

categories of shareholder resolutions with 127

reportedly filed and 73 voted on through August.

The most numerous proposals (32) followed a

longstanding format developed by the Center for

Political Accountability (CPA), which calls for a semi-

annual report on companies’ direct and indirect

contributions, including to tax-exempt organizations,

used to influence elections or referenda. In addition to

an itemization of expenditures and recipients,

companies are also requested to disclose their policies,

procedures and executives responsible for making

political spending decisions. Also plentiful were

proposals (22) seeking an annual report of companies’

direct and indirect lobbying activities and grassroots

lobbying communications, including payments to trade

associations used for lobbying. These were first

introduced last year by union pension funds in response

to the 2010 Supreme Court decision in Citizens United

v. Federal Election Commission which lifted

restrictions on independent political expenditures by

corporations and unions.

Despite the heightened attention to campaign finance,

support levels for both types of resolutions actually

dropped this year. The CPA proposals averaged 28.2%

support (versus 32.8% in 2011), and the grassroots

lobbying proposals averaged 23.3% support (versus

24.1% in 2011). Only one political contribution

proposal received majority support (at WellCare Health

Plans), while one at Sprint Nextel, which had garnered

majority support last year, only registered 21% support

this year.

The decline in shareholder support is likely attributable

to several factors. An increasing number of companies

have enhanced their political contribution disclosures,

and business groups, such as the Business Roundtable,

have endorsed board oversight and the adoption of

policies governing political donations. In addition,


several large institutional investors changed their

policies last year on political spending resolutions so

they now oppose them (BlackRock and T. Rowe Price)

or abstain on them (TIAA-CREF). Even ISS, which

changed its policy this year to largely support

disclosure resolutions, ended up supporting fewer this

year than it did in 2011, as did Glass Lewis.22

ISS’s

recommendations clearly impacted voting outcomes:

every proposal that received less than 20% this year

was either opposed by ISS or occurred at companies

that had significant insider or hedge fund ownership.23

Less conventional campaign finance proposals

continued to receive single digit support this year.

These include proposals to prohibit corporate political

spending (Trillium Asset Management), proposals to

hold an annual shareholder advisory vote on corporate

political contributions (NorthStar Asset Management

and James Mackie), and Evelyn Davis’s perennial

proposals to disclose political donations in major

newspapers, affirm political non-partisanship in the

workplace, and disclose prior government service of

executives.

Transparency aside, it is evident that partisan activists

intend to use disclosures to publicly chastise companies

for supporting organizations or candidates that hold

pro-business or politically conservative views. This

year, health insurers Aetna and WellPoint came under

fire for donating to organizations that directly or

indirectly funded attack ads against the Patient

Protection and Affordable Care Act (ObamaCare),

including the U.S. Chamber of Commerce, American

Action Network, and America’s Health Insurance

Plans. At WellPoint the activist protest rose to the level

22 This year, ISS supported 81% of the CPA proposals and 68% of

the grassroots lobbying proposals, compared to 95% and 83%,

respectively, in 2011. Glass Lewis supported 48% of the grassroots

lobbying and CPA proposals this year, compared to 61% in 2011.

23 ISS opposed the CPA proposals at Aetna, Allstate, Caterpillar,

JPMorgan Chase, Republic Services, and WellPoint. ISS opposed

the grassroots lobbying proposals at Citigroup, Goldman Sachs

Group, International Business Machines, Kraft Foods, PepsiCo,

Southern, and United Parcel Service. Proposals at AutoNation, Geo

Group, Royal Caribbean Cruises, Sunrise Senior Living, and Wal-

Mart Stores also received less than 20% support, despite a favorable

ISS recommendation, most likely because they have high insider or

hedge fund ownership.

of a “vote no” campaign against two directors—Susan

Bayh, for having political ties that allegedly biased the

board’s political spending decisions, and Julie Hill, a

member of the nominating and governance committee.

Ultimately, Change-to-Win’s protest vote fell flat, and

the WellPoint directors received over 92% support.

Even beyond proxy season, activists have continued to

pressure companies to drop their memberships in

“controversial” organizations. Heading their list is the

American Legislative Exchange Council (ALEC),

which was also singled out in this year’s grassroots

lobbying resolutions. Referred to by detractors as a

“corporate bill mill,” ALEC writes and endorses model

legislation on state-level public policy issues, which has

included voter ID, stand-your-ground, and illegal

immigration laws. In July, a coalition of investors led

by AFSCME and Walden Asset Management wrote

open letters to some 50 companies asking their boards

to review the reputational and business risks of their

continued involvement with ALEC, as well as with the

Heartland Institute, a conservative think tank which

promotes free-market environmentalism and skepticism

about man-made global warming. Both organizations

have faced numerous corporate defections this year.

Drug makers have also been targeted with a recent

letter-writing campaign over their membership in the

Pharmaceutical Research and Manufacturers of

America (PhRMA). During the mid-year elections,

PhRMA contributed to two non-profits (the America

Future Fund and American Action Network) that

backed congressional candidates who want to defund

Planned Parenthood. Because the companies in

question—Johnson & Johnson, Merck, Pfizer, and

Bayer—produce contraceptives, the investor coalition

regards their affiliation with PhRMA as inimical to

shareholder interests.

Looking Ahead

Looking ahead to 2013, shareholder activists can be

expected to press forward on issues where they’ve

made the greatest inroads this proxy season, namely

board declassification and majority voting in director

elections. They have an abundance of targets.

According to data from SharkRepellent, classified


boards still prevail at 18% of S&P 500 firms and 46%

of Russell 3000 firms, while plurality voting remains

the norm at 21% of S&P 500 firms and 69% of Russell

3000 firms. Proponents will also reload their proposal

pipeline with appeals for independent board chairmen

and expanded special meeting and written consent

rights, though these are areas of governance where

issuers have been able to reach middle-ground

alternatives with their major shareholders. Campaign

finance proposals, on the other hand, are likely to be

scaled back in the aftermath of the November

presidential elections.

Based on this year’s proxy votes, over 200 boards will

be on the hot seat in 2013 over majority-supported

shareholder proposals, failed SOP votes, or directors

who received majority dissent this year (see Tables 4, 5,

and 6). If they fail to adequately address the underlying

shareholder concerns, they may face not only backlash

against their directors, but an even more unsettling

prospect: proxy access proposals. Indeed, the USPX

coalition has already indicated that poor SOP results

will be a factor in building their 2013 proxy access

focus list. Companies in that unenviable position, and

even those that are not, will need to prepare for any

contingency. The 2013 proxy season is only six

months away.

Table 1: 2012 to 2011 Shareholder Proposal Comparison*

Governance Proposals 2012

(through August)

Average Support

Majority Votes

2011 Average Support

Majority Votes

Declassify board 52 80.1% 47 41 71.5% 36

Director removal 1 62.6% 1 1 49.4%

Majority voting 37 62.0% 23 39 61.3% 25

Proxy access 11 30.9% 2

Expense reimbursement for proxy contests 1 6.1%

Majority vote shareholder committee 1 16.8%

Poison pill 5 65.6% 4 1 69.1% 1

Cumulative voting 14 23.7%

27 29.7%

Supermajority voting 18 68.6% 16 15 57.2% 10

Dual-class stock 4 33.2% 1 6 21.1%

Special meetings 17 44.4% 7 30 41.2% 5

Written consent 21 45.7% 6 33 48.1% 12

Independent chairman 52 35.2% 4 29 34.1% 4

Director independence and qualifications 3 29.0% 1 1 13.8%

Outside board seats 1 3.7%

Succession planning 4 22.1%

3 29.5%

Reincorporate to Delaware 2 29.4% 1 2 39.0%

Repeal exclusive venue 2 37.6%

Maximize value 2 33.0%

2 14.7%

Miscellaneous** 5 3.5% 1 2 0.8%

Lead director

2 23.0%

Total Governance Proposals 253

114 234

93


Compensation Proposals 2012

(through August)

Average Support

Majority Votes


Majority Votes

Severance pay 1 66.2% 1 4 45.0% 2

Bonus deferral 3 17.7%

Accelerated vesting of equity awards 12 38.2%

3 41.5%

Golden coffins 2 40.2%

3 28.1%

Tax gross-ups 2 31.3%

2 33.4%

SERPs 2 30.8%

3 29.8%

Clawbacks 2 18.2%

3 26.2%

Retention ratio 29 24.2%

11 23.9%

Performance-based awards 5 28.0%

4 34.5%

Director pay 2 4.6%

4 19.8%

Hedging policy 1 38.2%

Pay disparity 1 7.2%

3 9.2%

Link pay to social issues 3 6.1%

4 5.2%

Compensation disclosure 1 10.6%

2 11.6%

Miscellaneous compensation 5 25.5% 1 2 42.7%

Pay-for-superior performance

1 31.5%

Total Compensation Proposals 71

2 49

2

Environmental & Social (E&S) Proposals 2012

(through August)

Average Support

Majority Votes


Majority Votes

Animal welfare 12 4.6%

9 4.5%

Board diversity 2 28.4%

2 24.7%

Charitable contributions 1 2.2%

Environment

Climate change - conservative view

4 2.2%

Coal 8 19.3%

8 21.9% 1

Hydraulic fracturing 4 25.5%

5 40.7%

Environmental impact report 3 13.6%

3 13.4%

Climate change report 1 21.2%

3 11.8%

GHG emissions reduction 4 22.3%

10 17.6%

Energy efficiency 1 29.5%

Oil sands

2 27.5%

Nuclear 2 10.0%

1 19.7%

Worker refinery safety 3 20.2%

4 28.2% 1

Renewable energy 2 6.1%

2 5.6%

Miscellaneous climate change 1 16.0%

Paper and forestry 2 17.5%

1 29.4%

GMOs 1 5.7%

1 6.3%

Palm oil 1 37.0%

1 5.8%

Recycling 4 19.8%

3 22.7%


Environmental & Social (E&S) Proposals 2012

(through August)

Average Support

Majority Votes


Majority Votes

Toxic substances - BPA

1 26.0%

Board environmental risk committee 1 3.8%

Director with environmental expertise 3 19.2%

3 20.3%

Miscellaneous environmental

1 30.5%

Equal employment

EEO report 3 19.1%

2 13.9%

Miscellaneous employment

1 1.9%

Sexual orientation - conservative view 1 2.0%

1 3.2%

Sexual orientation in EEO policy 8 31.1%

9 33.9% 1

Finance

Audit foreclosure practices 3 12.1%

3 30.1%

Mortgage servicing controls 1 4.8%

1 7.0%

Risk management

1 8.2%

Collateral in derivatives trading

1 33.7%

Health

Miscellaneous health 2 5.3%

1 7.2%

Drug pricing

4 3.2%

Human rights

Country selection and divestiture 3 11.6%

3 12.1%

Code of conduct 5 19.4%

7 17.5%

Vendor code of conduct

3 14.3%

Human right to water 1 9.3%

2 6.0%

Internet privacy and net neutrality 3 5.8%

1 42.5%

Board oversight of human rights

1 8.6%

Miscellaneous human rights 1 18.6%

Political activities

Lobbying & political contributions - conservative view 2 3.0%

2 5.2%

Grassroots lobbying 22 23.3%

6 24.1%

Political contribution disclosure 32 28.2% 1 38 32.8% 1

Chamber of Commerce board membership 1 9.7%

7 6.1%

Say on political contributions 8 4.0%

1 6.7%

Prohibit political contributions 3 5.1%

1 3.8%

Political non-partisanship 1 5.9%

2 7.2%

Publish political contributions in newspapers 1 4.1%

2 4.4%

Government service 3 3.5%

2 8.1%

Sustainability

Sustainability report 9 33.4%

7 38.7% 1

Supplier sustainability report 1 6.9%

1 2.0%

Board sustainability committee 1 4.1%

3 3.5%

Tobacco 2 2.5%

3 2.4%

Miscellaneous E&S 1 0.0%

Total E&S Proposals 174

1 180

5


Total SH proposals (All) 498

117 463

100

*Proposals voted on (where results reported) and floor proposals through August 2012. Votes are calculated as FOR/FOR+AGAINST. **In 2012, these included two proposals to require mandatory arbitration of shareholder claims and two floor proposals to eliminate advance notice requirements. In 2011, these included one proposal to eliminate the board size range and one proposal to conduct a feasibility study on converting to non-profit status.


Table 2: Proxy Access Proposals on Ballots

Company Proponent Meeting

Date ISS Rec

Glass Lewis Rec

Approval Required Support

Level FOR/ F+A

Wells Fargo NBIM Apr 24 FOR FOR Binding: majority of shares outstanding

25.0% 32.4%

Ferro USPX Apr 27 AGAINST FOR

Non-binding: majority of votes cast (including abstentions and broker

non-votes)

12.1% 13.4%

KSW Furlong Fund May 9 AGAINST AGAINST

Binding: majority of votes cast (excluding

abstentions and broker non-votes)

21.0% 21.0%

Charles Schwab NBIM May 17 FOR FOR Binding: 80% of shares

outstanding 26.0% 30.9%

Princeton National Bancorp

USPX May 17 AGAINST FOR Non-binding: majority of votes cast (including

abstentions) 31.1% 32.1%

CME Group NBIM May 23 FOR FOR Binding: 67% of

outstanding Class A and B shares

26.6% 38.0%

Western Union NBIM May 23 FOR AGAINST Binding: majority of shares outstanding

27.6% 33.5%

Nabors Industries U.S. public

pension funds Jun 5 FOR FOR

Non-binding: majority of votes cast (including


Chesapeake Energy NYC pension

funds Jun 8 FOR FOR

Non-binding: majority of votes (including


Forest Laboratories USPX Aug 15 AGAINST FOR Non-binding: majority

of votes (including abstentions)

9.4% 12.2%

Medtronic USPX Aug 23 AGAINST AGAINST Non-binding: majority


7.4% 7.4%

H&R Block USPX Sept 13 AGAINST AGAINST Non-binding: majority


Average: 30.9%


Table 3: Proxy Access Proposals Withdrawn or Omitted

Company Proponent Status

Bank of America USPX Omitted

Cadus Furlong Fund Withdrawn

Chiquita Brands International USPX Omitted

Dell USPX Omitted

Goldman Sachs Group USPX Omitted

Hewlett-Packard Amalgamated Bank Withdrawn

MEMC Electronic Materials USPX Omitted

Microwave Filter Furlong Fund Withdrawn

Pioneer Natural Resources NBIM Withdrawn

Sprint Nextel USPX Omitted

Staples NBIM Omitted

Textron USPX Omitted


Table 4: Shareholder Proposals that Received Majority Support (through August 2012)

Company Proposal Board

Rec Support Level*

Consec. Years of Majority

Support (inc. 2012)*

Supported by Maj. of Shares O/S in 2012**

Company Adopted or Will in

2013

Airgas, Inc. Declassify board Against 64.1%

Yes

Ambassadors Group, Inc. Declassify board Against 98.9%

Yes Yes

ANN Inc. Declassify board None 96.9%

Yes

Apache Corp. Declassify board Against 89.5%

Yes

Baxter International, Inc. Declassify board For 98.2%

Yes Yes

Bemis Corp. Declassify board Against 75.1%

Yes

Best Buy Co. Declassify board For 98.6%

Yes Yes

CarMax, Inc. Declassify board Against 87.5%

Yes

Cerner Corp. Declassify board Against 65.0%

Yes

CF Industries Holdings, Inc. Declassify board Against 92.8% 2 Yes

Chipotle Mexican Grill, Inc. Declassify board Against 89.5%

Yes

Cognizant Technology Solutions Corp. Declassify board Against 91.2%

Yes

CSP Inc. Declassify board Against 82.3%

Yes Yes

DENTSPLY International, Inc. Declassify board Against 78.6%

Yes

Edwards Lifesciences Corp. Declassify board None 98.8%

Yes

Emerson Electric Co. Declassify board Against 77.2%

Yes Yes

Energen Corp. Declassify board Against 83.1%

Yes

EQT Corp. Declassify board Against 82.2%

Yes

F5 Networks, Inc. Declassify board Against 78.7%

No

FLIR Systems, Inc. Declassify board Against 82.8%

Yes

FMC Corp. Declassify board Against 82.8%

Yes

Healthways, Inc. Declassify board Against 90.9%

Yes

Hess Corp. Declassify board Against 79.8%

Yes

Hospitality Properties Trust Declassify board Against 90.1% 3 Yes

J.M. Smucker Co. Declassify board Against 77.0%

Yes

Johnson Controls, Inc. Declassify board Against 85.2%

Yes

Lexmark International, Inc. Declassify board Against 92.9%

Yes Yes

Limited Brands, Inc. Declassify board Against 64.6%

Yes

Lorillard, Inc. Declassify board None 97.4%

Yes

Masco Corp. Declassify board Against 84.7%

Yes

MEMC Electronic Materials, Inc. Declassify board Against 95.6% 2 Yes

ModusLink Global Solutions, Inc. Declassify board Against 91.1%

Yes

Moody's Corp. Declassify board Against 77.1%

Yes

NetFlix, Inc. Declassify board Against 74.9%

No

People's United Financial Corp. Declassify board None 96.1%

Yes Yes

QEP Resources, Inc. Declassify board None 94.3%

Yes

Quest Diagnostics Inc. Declassify board None 96.1%

Yes

Red Hat, Inc. Declassify board Against 95.4%

Yes

Ryder System, Inc. Declassify board Against 88.2%

Yes

salesforce.com Declassify board Against 80.7% 2 Yes

SCANA Corp. Declassify board Against 61.7%

No



Rec Support Level*





2013

Snap-On Inc. Declassify board Against 88.2%

Yes

United States Steel Corp. Declassify board Against 83.3%

No

Urban Outfitters Inc. Declassify board Against 60.1%

Yes

VF Corp. Declassify board Against 63.1%

Yes

Vornado Realty Trust Declassify board Against 85.7% 3 Yes

Vulcan Materials Co. Declassify board Against 74.0% 2 Yes

Whole Foods Market, Inc. Allow director removal with or without cause

Against 62.6% 2 No

American Financial Group Inc. Adopt majority voting Against 54.0%

No Yes

Apple Inc. Adopt majority voting Against 80.4% 2 Yes Yes

Baker Hughes Inc. Adopt majority voting Against 56.6%

No

CF Industries Holdings, Inc. Adopt majority voting Against 91.7%

Yes

FLIR Systems, Inc. Adopt majority voting Against 58.3%

No

GEO Group, Inc. Adopt majority voting Against 64.7%

Yes

Graco Inc. Adopt majority voting Against 84.1% 3 Yes

Healthcare Services Group, Inc. Adopt majority voting Against 77.3%

Yes

International Bancshares Corp. Adopt majority voting For 89.9%

Yes

Middleby Corp. Adopt majority voting None 98.0%

Yes

National Health Investors, Inc. Adopt majority voting None 94.4%

No

New York Community Bancorp, Inc. Adopt majority voting Against 53.8%

No Yes

PACCAR Inc. Adopt majority voting For 97.1%

Yes Yes

Palomar Medical Technologies, Inc. Adopt majority voting Against 77.5% 2 Yes Yes

Penn National Gaming, Inc. Adopt majority voting Against 66.0% 2 Yes

PPL Corp. Adopt majority voting Against 54.4%

No

SolarWinds, Inc. Adopt majority voting Against 61.6%

Yes

Stifel Financial Corp. Adopt majority voting For 77.7%

Yes Yes

THQ Inc. Adopt majority voting None 91.4%

No

Ultimate Software Group, Inc. Adopt majority voting Against 64.1%

Yes

Urban Outfitters, Inc. Adopt majority voting Against 52.7%

No

Vornado Realty Trust Adopt majority voting Against 81.7% 2 Yes

Vulcan Materials Co. Adopt majority voting Against 61.9%

Yes

Nabors Industries Ltd. Adopt proxy access Against 56.2%

No

Chesapeake Energy Corp. Adopt proxy access Against 62.3%

No

Comcast Corp. Redeem poison pill Against 52.1%

No

Ecolab Inc. Redeem poison pill Against 68.8%

Yes

Gaylord Entertainment Co. Redeem poison pill None 95.9%

Yes Yes

Gilead Sciences, Inc. Redeem poison pill Against 79.4%

Yes

Baxter International Inc. Repeal supermaj. voting For 98.4%

Yes Yes

Chesapeake Energy Corp. Repeal supermaj. voting Against 87.0%

Yes

Edwards Lifesciences Corp. Repeal supermaj. voting Against 82.5%

Yes

Boston Private Financial Holdings, Inc. Repeal supermaj. voting Against 72.3%

Yes

Waste Connections, Inc. Repeal supermaj. voting Against 71.3%

Yes

Kansas City Southern Repeal supermaj. voting Against 70.1%

Yes



Rec Support Level*





2013

Advance Auto Parts, Inc. Repeal supermaj. voting Against 68.7%

Yes

FirstEnergy Corp. Repeal supermaj. voting Against 68.3%

Yes

NASDAQ OMX Group, Inc. Repeal supermaj. voting Against 68.1%

No

Vulcan Materials Co. Repeal supermaj. voting Against 67.4%

Yes

Medtronic, Inc. Repeal supermaj. voting Against 66.3%

No

OGE Energy Corp. Repeal supermaj. voting Against 65.1%

No

Amphenol Corp. Repeal supermaj. voting Against 61.2%

Yes

Mac-Gray Corp. Repeal supermaj. voting Against 58.9%

Yes N/A***

NetApp, Inc. Repeal supermaj. voting None 89.7%

Yes

Orrstown Financial Services, Inc. Repeal supermaj. voting Against 53.8%

No

Providence and Worcester Railroad Co. Eliminate dual-class stock None 57.0%

No

Orchids Paper Products Co. Allow special meetings None 84.9%

No N/A***

Repligen Corp. Allow special meetings Against 76.0%

Yes N/A***

NYSE Euronext Allow special meetings Against 60.0% 2 No Yes

Celgene Corp. Allow special meetings Against 59.9%

No

Allergan Inc. Allow special meetings Against 55.3%

No

NetFlix, Inc. Allow special meetings Against 53.4%

No

NASDAQ OMX Group, Inc. Allow special meetings Against 50.2%

No

Express Scripts Inc. Adopt written consent Against 55.2%

No

JPMorgan Chase & Co. Adopt written consent Against 52.7% 2 No

Gilead Sciences, Inc. Adopt written consent Against 52.5%

No

Eastman Chemical Co. Adopt written consent Against 51.7%

No

International Paper Co. Adopt written consent Against 51.5% 2 No

McKesson Corp. Adopt written consent Against 50.8%

No

Sempra Energy Appoint indep. chairman Against 55.2%

No

KeyCorp Appoint indep. chairman Against 53.8%

No

Kindred Healthcare, Inc. Appoint indep. chairman Against 52.3%

No

McKesson Corp. Appoint indep. chairman Against 50.9%

No

Fred's Inc. Nom. gov. expert to board Against 59.8%

Yes

Chesapeake Energy Corp. Reincorporate in DE Against 55.4%

No Yes

AMERCO SH ratification of D&O

decisions For 79.9%

Yes

Nabors Industries Ltd. SH approval of severance Against 66.2%

Yes

Patriot Scientific Corp. Require D&O to purchase

company stock Against 73.3%

No

WellCare Health Plans, Inc. Disclose political

contributions Against 52.7%

No

Number of Majority Votes 117

*Based on FOR/FOR+AGAINST votes. **The proxy advisors and many shareholders will oppose directors who fail to implement a shareholder proposal that was supported by a majority of votes cast over multiple years or by a majority of shares outstanding in one year. ***The shareholder proposal was a bylaw amendment. The Repligen proposal passed and the Mac-Gray and Orchids Paper Products proposals failed.


Table 5: Majority Votes Against Directors (through August 2012)

Company Number of Directors

Board Has Taken

Action*

Aetrium Incorporated 2

Amerigon Incorporated 1

Barnes Group Inc. 2

Boston Beer Company, Inc. 1

Cablevision Systems Corporation 3

CF Industries Holdings, Inc. 1

Cheniere Energy, Inc. 1

Chesapeake Energy Corp. 2 Yes

China Biologic Products, Inc. 2 Yes

Cobra Electronics Corporation 1

CoStar Group, Inc. 1

Computer Programs and Systems, Inc. 1

Ferro Corp. 1

First California Financial Group, Inc. 2

GameTech International, Inc. 2 Yes

Gold Resource Corp. 2

Graco Inc. 2

Healthcare Services Group, Inc. 1

Hospitality Properties Trust 1

Innospec Inc. 1

Jacksonville Bancorp, Inc. (FL) 1 Yes

KKR Financial Holdings LLC 1

Loral Space & Communications Inc. 1

MakeMusic Inc. 4

Management Network Group, Inc. 1 Yes

Maxygen, Inc. 1

Mentor Graphics Corporation 5

Northwest Pipe Co. 1

NYSE Euronext 1 Yes

Omega Protein Corp. 1

OCZ Technology Group, Inc. 1

Patriot Scientific Corp. 2

Qualstar Corp. 3

Rocky Brands, Inc. 1

Savient Pharmaceuticals, Inc. 1

Senior Housing Properties Trust 1

Sequenom, Inc. 1

Simpson Manufacturing Co., Inc. 1

Sirius XM Radio Inc. 1

Soligenix, Inc. 1

SRI/Surgical Express, Inc. 2

TASER International, Inc. 1


Company Number of Directors

Board Has Taken

Action*

Texas Capital Bancshares, Inc. 1

Texas Rare Earth Resources Corp. 1

TRW Automotive Holdings Corp. 1

United Stationers Inc. 1 Yes

Vornado Realty Trust 3

Westfield Financial, Inc. 1

ZOLL Medical Corp. 1

Number of Directors 72

Number of Companies 49

*The board has either accepted the director's resignation or corrected the cause of shareholder dissent.


Table 6: Failed SOP Votes (through August 2012)

Company Support Level*

Abercrombie & Fitch Co. 24.5%

Actuant Corporation 46.7%

American Eagle Outfitters, Inc. 39.9%

Applied Micro Circuits Corp. 42.0%

Argo Group International Holdings, Ltd. 45.5%

Best Buy Co., Inc. 38.3%

Big Lots, Inc. 31.2%

Cedar Realty Trust, Inc. 38.3%

Cenveo, Inc. 40.4%

Charles River Laboratories International, Inc. 36.1%

Chemed Corporation 47.9%

Chesapeake Energy Corp. 20.0%

Chiquita Brands International, Inc. 19.8%

Citigroup Inc. 45.2%

Community Health Systems, Inc. 32.9%

Comstock Resources, Inc. 34.7%

Cooper Industries plc 29.4%

CryoLife, Inc. 38.8%

Digital River, Inc. 19.2%

Epiq Systems, Inc. 30.1%

First California Financial Group, Inc. 49.1%

FirstMerit Corporation 46.6%

Gentiva Health Services, Inc. 36.5%

G-III Apparel Group, Ltd. 35.2%

Healthways, Inc. 33.2%

Hercules Offshore, Inc. 48.0%

Iconix Brand Group, Inc. 29.9%

Infinera Corp. 41.6%

InSite Vision Incorporated 58.7%

International Game Technology 44.4%

KB Home 48.4%

Kforce Inc. 39.8%

Kilroy Realty Corporation 29.9%

Knight Capital Group, Inc. 32.0%

Manitowoc Company, Inc. 48.4%

Masimo Corporation 37.7%

Mylan Inc. 47.9%

Nabors Industries Ltd. 25.2%

NRG Energy, Inc. 44.9%

NuVasive, Inc. 32.7%

OM Group, Inc. 23.6%

Palomar Medical Technologies, Inc. 47.0%

Phoenix Companies, Inc. 46.1%


Company Support Level*

Pitney Bowes Inc. 35.2%

Rigel Pharmaceuticals, Inc. 44.6%

Ryland Group, Inc. 40.9%

Safety Insurance Group, Inc. 42.9%

Sequenom, Inc. 48.3%

Simon Property Group, Inc. 26.7%

Sterling Bancorp 40.0%

Tower Group, Inc. 30.3%

Tutor Perini Corporation 38.3%

United Online, Inc. 31.9%

VCA Antech, Inc. 40.9%

Viad Corp 21.1%

Yahoo! Inc. 50.1%

Number of Companies 56

*Based on FOR/FOR+AGAINST votes. InSite Vision and Yahoo! counted abstentions in determining that the SOP vote failed.

For further information or questions, please contact:

973-873-7700

www.AllianceAdvisorsLLC.com

Alliance Advisors Newsletter Sept. 2012 (2012 Proxy Season Review-Shareholder Resolutions)

Technology

Transcript of Alliance Advisors Newsletter Sept. 2012 (2012 Proxy Season Review-Shareholder Resolutions)